Two consecutive months of positive market performance in November and December 2023 pushed the funded status of the 100 largest U.S. public pension plans to its highest point of 2023. The plans’ estimated funded status increased from 72.4% as of October 31, 2023, to 75.9% as of November 30, 2023, and further increased to 78.2% as of December 31, 2023, as measured by the Milliman 100 Public Pension Funding Index (PPFI).
Figure 1A: PPFI funded ratio
We have also projected the aggregate funded status forward from December 31, 2023, to December 31, 2024, under three scenarios. The baseline scenario assumes each plan’s future investment returns will equal that plan’s current reported interest rate assumption (median rate of 7.0% in this study). The “optimistic” and “pessimistic” scenarios assume each plan’s investment returns will be 7% higher or lower, respectively, than that plan’s current reported interest rate assumption.
Figure 1B: PPFI funded ratio with projections
In aggregate, we estimate the PPFI plans experienced investment returns of 5.2% in November and 3.3% in December, with individual plans’ estimated returns ranging from 2.5% to 7.7% in November and 1.7% to 5.0% in December. The Milliman 100 PPFI asset value increased from $4.480 trillion as of October 31, 2023, to $4.704 trillion as of November 30, 2023, and to $4.857 trillion as of December 31, 2023. During November, the plans gained market value of approximately $233 billion, which was offset by a net negative cash flow of $9 billion. During December, the plans gained market value of approximately $162 billion, offset by a net negative cash flow of $9 billion.
Figure 2: PPFI investment returns
The total pension liability (TPL) continues to grow and stood at an estimated $6.213 trillion as of December 31, 2023, up from $6.185 trillion as of October 31, 2023, and $6.199 trillion as of November 30, 2023. Just as pension assets grow over time with investment income and shrink over time as benefits are paid, so too does the TPL grow over time with interest and shrink as benefits are paid. The TPL also grows as active members accrue pension benefits.
Figure 3: PPFI funded status
The combined market rise in November and December pushed nine plans above the 90% funded mark as of December 31, 2023; now, 21 plans stand above this benchmark compared to only 12 as of October 31, 2023. Meanwhile, at the lower end of the spectrum 11 plans moved above the 60% funded mark, reducing the total number of plans under this benchmark to just 15, compared to 26 as of October 31, 2023.
Figure 4: Funded ratios at December 31, 2023
About the Public Pension Funding Index
This update is an estimate based on Milliman’s 2023 Public Pension Funding Study and was updated for market returns from June 30, 2023, to December 31, 2023. The 2023 annual study encompasses adjustments made as of June 30, 2023, and reflects updated publicly available asset and liability information gathered for the annual study.